Minister Bos waarschuwt: landen met hoge schulden schaden de Euro (en)
EUOBSERVER / BRUSSELS - Public debt in eurozone countries should be monitored more strictly, as high-debt states may undermine the stability of the whole monetary union, Dutch finance minister Wouter Bos i has said, in remarks echoing earlier warnings that future expenditure arising from aging populations could pose a risk to the survival of the euro.
Speaking at the Brussels Economic Forum on Thursday (15 May), Mr Bos argued that policymakers in the single currency area should "put the focus on sustainable debt positions on an equal footing with the existing focus on annual budgetary results."
He warned that with a greater burden on public budgets due to rising pensions and healthcare costs, coupled with a diminishing working-age population, "three-percent annual deficits are really no longer permissible and in many cases even balanced budgets may be inadequate."
"Large debts have to be purged and sustainability guaranteed," he stressed, adding that otherwise the euro area may suffer, as "doubts about sustainability will push up the cost of capital" in the monetary union.
The "continued differentiation of debt positions [among member states] can frustrate the conduct of a common monetary policy. And it would be even harder if there were doubts about the credit worthiness of one or more member states," said Mr Bos.
Public deficit and debt are the two key indicators governed by rules underpinning Europe's monetary union, with the permitted threshold for the budgetary spending set at three percent of gross domestic product (GDP) and a limit for public debt at 60 percent of GDP.
But while most EU countries have improved in terms of public expenditure performance, seven out of 15 eurozone states ran a higher than allowed debt last year, including the three heavyweights - Germany (65%), France (64.2%), and Italy (104%).
Rome tops the debt blacklist, followed by Greece (94.5%) and Belgium (84.9%), and the Dutch minister appeared to be addressing Italy specifically when he said: "Let me be quite clear that a debt position of, say, 100 percent of GDP is simply not acceptable, even if it were stable."
Mr Bos echoed concerns previously mentioned by his compatriot and ex-commissioner Frits Bolkestein i, who suggested in 2006 that states such as Italy facing demographic change problems might put the survival of the euro at risk.
These states "will be forced by political pressure to borrow more and increase their budget deficit, with consequences for interest rates and inflation," he indicated, adding: "the real test for the euro is not now, but in ten years' time".
"Therefore, in my view the long-term chances of survival of the euro should be questioned," noted Mr Bolkestein.